In the last article Productising a service business part one: separating capabilities from products, we discussed the difference between capabilities and products. The first step was to start by writing down some of the existing processes for delivering your services.
If you started doing that, what you probably found was that in their current form your services are too complex to be considered as “products”, and as a result you may be thinking “this systemisation stuff just doesn’t work for my business!”
But take heart …
In this article we’re going to talk about how to systemise the sales process in order to create a product from a service.
WHAT A REAL SALES PROCESS LOOKS LIKE
I’m a huge fan of Justin Roff-Marsh and his book The Machine (which is still in production, but much of which is already available online).
It’s a pretty big read and a lot to digest, but fortunately there’s a shortcut for the rest of us to see just what a highly productised sales funnel looks like. All you have to do is open a savings account at your local bank.
Quite often, banks will have an introductory offer which rewards customers for opening a standard savings account. This is the most commoditised product that a bank can offer: everyone needs a savings account these days, they rarely offer any interest and banks usually compete on things like monthly and transaction fees.
Even though a savings account is referred to by the bank as “product”, if you look closely it’s really just a very clearly defined service. It’s a service that has a target market, an easy way to access that market, well defined setup procedures (many of which are automated through custom made technology) and well defined service delivery processes (again supported by custom technology).
Once you’re a customer, banks then have your audience to up-sell all sorts of additional products: personal and business financing options, insurance, term deposits, investment vehicles – the list goes on.
If you look at it closely, the standard savings account is not actually the bank’s main “cash cow”, but it is the way most of their customers are introduced to the bank.
So where does the bulk of bank revenue come from?
A quick look at the figures below shows that the bulk of bank revenue comes from net interest income, which accounts for 65 percent of all revenue.
Bank Revenue Percentages
Broadly speaking, “banks basically make money by lending money at rates higher than the cost of the money they lend.”
This means that for a bank, day-to-day savings accounts with low balances and from which cash can be deducted at any time, are not the ideal account for people to hold.
But these accounts represent most peoples’ first interaction with a bank and they make further revenue possible.
WHAT YOU CAN LEARN FROM BANKS
The key lesson to take away from looking at the sales funnel of a bank is that the first product they sell is not the product that they really want to sell.
Another key characteristic of this initial sell is that it is a low risk product from the consumer’s perspective. Personal savings accounts do not cost money to open and they don’t come with a contract. There is little or no investment on behalf of the consumer when opening one of these accounts.
Additionally, the process of opening one of these accounts can be done by a bank employee with no special training. Whereas more sophisticated products may need to be sold by bank employees with more specialised skills, opening a standard personal savings account can be done over the counter by any teller.
The personal savings account is something that everyone needs, that everyone is actively looking for at some point in time, and which enables the bank to establish a trusting relationship with the consumer as a platform for up-selling future products (or cross-promoting products from partners).
So to summarise, the key characteristics of the initial product you sell are:
- Well defined and easily addressable target market that is actively looking for the product
- Well defined and easy to describe service that can be delivered by virtually anyone with little training (including being fully automated)
- Low risk, low commitment purchase
- Establishes a trusting relationship with the customer that can then be used as a platform to sell more complex, higher margin product offerings
HOW THIS WORKS IN PRACTICE
When it comes time to take this theory and put it into practice it can often be difficult to make the conceptual leap from “capability” (what you CAN do) to “product” (what you WILL do).
So here is a suggested process for identifying what capabilities you have that can be turned into easily sellable products:
1. Brainstorm your capabilities then put them in as keywords in the Google AdWords Keyword Planner. If you’d like to see exactly how I use the Google AdWords Keyword Planner you can buy my AdWords eBook, but there are also umpteen free tutorials available on how to use it.
2. Identify an information product you can create based on what search terms have sufficient volume at a price you can afford to “fail while you learn”. For most businesses I’ve found that aiming for about $2/click and 10 clicks per day (i.e. around $600 per month) is an acceptable risk level.
3. Create a landing page for that information product and create a first version of it. Don’t invest too heavily in creating the product before you’ve tested whether or not it will sell. Use email lead generation and drip campaigns to nurture leads into sales.
4. Establish follow up procedures to up-sell prospects to higher margin products. Initially these will still be very service-like offerings, but as you go you can systemise more and more of your services into an ascending sales funnel of highly productised services, hiring more and more skilled people to do the work.
Inevitably, productising your services involves restricting what services you provide to those which can be delivered in a scalable, repeatable fashion.
Productisation is much more than just creating “package pricing” – if you can’t hire people to do all aspects of finding, closing and fulfilling sales, then you’re only doing half the job (or, more correctly THEY are only doing half the job).
In the next article we’re going to look at how you can start to separate the different aspects of product delivery into distinct roles, and start building resilience and scalability into your business.
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